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Medical Costs Skyrocket: Staff Contributions Remain Steady Amidst Rising Healthcare Expenditures

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The healthcare sector has been a focal point of economic discussions for years, with medical costs consistently on the rise. Recent data from Mercer’s National Survey of Employer-Sponsored Health Plans 2023 has shed light on this escalating issue, revealing that US employers anticipate a 5.4% surge in health benefit costs per employee in 2024. This projection comes even after employers have made adjustments to their plans to curtail this growth.

Mercer Survey Healthcare Cost Strategies
Healthcare Cost Strategies – Mercer

Historically, annual health benefit cost growth hovered around 3-4%. However, the projected 5.4% increase suggests that recent high inflation rates and labor shortages in the healthcare sector have driven costs upwards. Factors such as the consolidation of health systems, the introduction of high-priced gene and cellular therapies, and a sudden spike in the use of costly GLP-1 drugs for diabetes and obesity treatment have all contributed to this rise.

Interestingly, if employers refrained from making any changes to their plans, the cost for their primary medical plan would escalate by an average of 6.6%. This marginal difference between projected increases before and after plan adjustments indicates that most employers are refraining from making drastic cost-cutting changes, primarily due to concerns about employee healthcare affordability.

Over the past half-decade, many large employers have steered clear of the cost-management strategy of transferring costs to employees. This is evident from the minimal growth in deductibles and other cost-sharing requirements. During the pandemic, some employers even chose to bear the brunt of cost increases, rather than burdening employees with higher out-of-pocket expenses.

However, it’s not all bleak. Despite the historic inflation levels witnessed last year and the ongoing healthcare labor shortages, there are factors helping to moderate cost growth. Employers are increasingly implementing long-term cost-management strategies targeting the primary cost drivers, such as complex care and chronic medical conditions.

Many have introduced Centers of Excellence (COEs) to their health plan networks, which historically catered to complex surgeries but now cover a broader range of healthcare needs. Additionally, 28% of large employers now have a healthcare navigation service in place, ensuring that plan members receive the best possible care promptly.

Furthermore, employers continue to enhance benefit packages to meet changing needs and attract and retain employees. Behavioral healthcare remains a significant focus, with 76% of large respondents emphasizing the importance of improving access to behavioral healthcare in the coming years. Notably, the survey found that employers do not plan to increase the employees’ share of coverage costs in 2024. Large employers expect employees to cover an average of 22% of the total health plan premium costs through paycheck deductions in 2024, a figure that remains unchanged from 2022 and 2023.

In conclusion, while medical costs are undeniably on the rise, employers are making concerted efforts to balance cost management with the provision of quality healthcare benefits. As the landscape of healthcare continues to evolve, it remains to be seen how these trends will shape the future of medical expenses and employer-sponsored health plans.

Source: Mercer’s National Survey of Employer-Sponsored Health Plans 2023

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